Public Banking Institute Launched

Public Banking Institute Launched
Seeks to Rescue U.S. Public Finances
Mike Kraus
January 13, 2011

There is mounting evidence that the public finances of the United States are verging on collapse.

The national debt has burdened the American people with a debt service – the cost of interest – that threatens to swallow the entire federal budget in years ahead.

States from New Jersey to Illinois, Texas and California are grappling with immense budget deficits. At least fifteen major U.S. cities are reported on the verge of bankruptcy. In a desperate attempt to stave off calamity, state and municipal governments are taking measures that many view as a worse calamity.

Police, firefighters, health care providers and teachers are being laid off. City street lights are turned off at night, responses to 911 calls are provided on a “fee for service” basis, public parks are abandoned and infrastructure vital to commerce is left to decay to third world status. Unemployment is chronic and home foreclosures roll on.

Americans are wondering if there is a way out of what now appears to many as a decades long and accelerating decline of the fortunes of the once fabled American middle class.

A diverse group of American educators, entrepreneurs and businesspeople, local government officials and civic leaders, economists, writers, lawyers and others think they have identified the central problem.

They have banded together to form the Public Banking Institute (PBI), a not-for-profit educational organization that hopes to explain to the American people how a national network of publicly owned banks can revive the American economy.

Ellen Hodgson Brown, founder of the Public Banking Institute is the author of “Web of Debt,” a groundbreaking and frequently cited diagnostic and prescriptive analysis of the American money system. In her view, American banking and finance have been turned upside down.

“We are in an era where the public is being required to lend to private banks, even though banks were originally supposed to lend to the public. What we have now is a system where bank profits are privatized but bank losses are shared by the public.

“We’ve bailed out banks because we know credit is essential to society, like a public utility such as electricity and water – without it, our economic system fails. So, in essence, the supply of credit has more to do with public and governmental services and less to do with private enterprise.”

Brown notes that public banks were introduced by the Quakers in the original colony of Pennsylvania.

“The Quakers were known as the ‘Society of Friends.’ Their public banking concept was a fore-runner of the PSFS – the Philadelphia Savings Fund Society. The word ‘society’ is telling. We want to put the needs and economic aspirations of the whole of the American society back into the banking picture.

“The Public Banking Institute will explore how credit is created using public resources, how to price it competitively, and how to use it as a low-cost alternative that benefits the free market and the public.”

Krauss' article continues here.

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From the Public Banking Institute's new website:

Public Banks are...

• Viable solutions to the present economic crises in US states.
• Potentially available to any-sized government or community
able to meet the requirements for setting up a bank.
• Owned by the people of a state or community, rather than
by private investors.
• Economically sustainable, because they operate like private
banks
• Able to offset tax increases with returned credit income to
the community.
• Ready sources of credit for local governments, eliminating
the need for large “rainy day” funds.
• Required to promote the public interest, as defined in their
charters.
• Constitutional, as ruled by the U.S. Supreme Court

...and are not

• Operated by politicians; rather, they are run by professional
bankers.
• Boondoggles for bank executives; rather, their employees are
salaried public servants -- paid by the state, with a transparent pay structure -- who would likely not earn bonuses,
commissions or fees for generating loans.
• Speculative ventures that maximize profits in the short term,
without regard to the long-term interests of the public.